As a regular subscriber to the REI Magazine, you may recognise our 2013 Real Estate Investor of the Year Award recipient, Karl Landman. We recently caught up with Karl to find out about any changes to his property investment strategy that he may have implemented in the last three years.
Winning the award in 2013
Karl managed to impress our expert panel of judges in 2013 with his sizeable portfolio. At the time of receiving the award, his portfolio included seven properties, one cottage, and a net worth of R11.5 million ‒ all with no debt.
It was also his hard work, ethics, high levels of integrity, good cash flow and low risk approach that caught the judges’ attention. They were impressed with how he had managed to take responsibility for his own investments and turn a period of financial loss completely around. In addition, the panel felt that his philanthropic approach and desire to make a difference in people’ s lives made him a clear-cut winner for 2013.
And they were not to be disappointed. Karl immediately pledged his R50,000.00 cash prize to an elderly lady in Benoni to help repair her leaking corrugated roof and water-damaged ceiling boards.
For Karl, winning the 2013 award was a recognition of his and Laree’ s perseverance in achieving a retirement goal they had set in their mid-twenties.“ It made us realise how far we have come from very humble beginnings and makes us grateful for the opportunities we have had during life’ s journey”, said Karl.
Growth and restructuring Since winning the Real Estate Investor of the Year Award in 2013, Karl and his wife, Laree, have continued to focus on growing their asset base and have also restructured their entire portfolio. Karl shared with us that they managed to achieve complete financial independence two years ago, and now live debt free. When asked about this achievement, Karl pointed to his property investment strategy over the last 28 years, which he feels has been the key driver for their current financially independence.
Debt-free and independent living has not( yet) convinced Karl to put his feet up and enjoy a spell of retirement, however. He continues to work as a General Manager in the medical / pharmaceutical industry ‒ simply because he loves the business.
Minimising risk and matching life cycles The Landmans decided to restructure their entire portfolio in 2016, firstly to align with their life stage and, secondly, to minimise risk associated with geopolitical and currency events going forward.
For Karl, property remains the focus of their retirement plan and overall nett worth, which has expanded by 53 % in the last three years to R17.6 million ‒ all with no debt.
“ Property now represents 50 % of our asset base but has been restructured into 40 % fixed property and 10 % listed property, both domestic and offshore. We are passionate about property but strongly believe in a holistic / diversified investment approach that also considers other supplementary asset classes( that add capital growth and cash) and offshore exposure.”
“ We have increased our offshore exposure to 24 % of our entire portfolio, as a hedge against geo-political and currency risk,” shared Karl.“ We considered buying an offshore property but I feel the risk associated with being so far away from a fixed property is very high versus a USD REITs( managed income producing real estate investments). REITS provide a reasonable, and sometimes better, nett return, without concerns about tenants, repairs and maintenance. Never mind potential legal matters.”
Ongoing property sales and investments The Landmans have since sold all their 2 bedroom units, due to lower returns because of increase in cost and lower rental increases. Karl explained that they get better nett yields on 3 bedroom simplexes, townhouses and clusters.
“ Our next step is to invest purely in clusters on the East Rand within the R1.2m and R1.5m price range. Our latest acquisition is in Kingswood ‒ a 3 bedroom, facebrick cluster unit we bought cash for R1.350m and currently valued at R1.650m. We spent R100,000.00 on repairs and maintenance and currently receive a 9.1 % gross annual rental yield on this property( with the repairs and maintenance costs included).”
THE LANDMAN’ S PORTFOLIO BY ASSET CLASS:
• Fixed property 40 %- Monthly income
• Domestic listed property 2 %- Monthly income
• Foreign USD Listed property 8 %- Rand hedge
• Domestic Equity 24 %- Capital growth & dividends
• Domestic Cash 6 %( High Yield Cash Management Fund)- Always keep 12 months cash at hand for repairs, maintenance, unforeseen events and buying investment opportunities, like undervalued properties
• Foreign USD Equity 11 %- Rand hedge
• Foreign USD Cash 1 %- For travel
• Domestic Bonds 6 %- Monthly income
• Foreign USD Bonds 2 %- Rand hedge
www. reimag. co. za MARCH 2017 SA Real Estate Investor 17